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Neighbors Can Form HOA to Prohibit Short-Term Rentals

Question: We have lived in the same community of 28 homes in Sedona for almost 20 years. We used to have great neighbors. For example, on July 4th we would have a big barbeque at someone’s house in our community. In the last few years, however, due to the VRBOs and Airbnbs in our community, our community has radically changed. Only 12 of the 28 homes in our community now are owned by residents. The other 16 homes in our community are short-term rentals, sometimes only for weekends. We are very unhappy. Our understanding is that, although Sedona and other towns and cities in Arizona cannot prohibit short-term rentals, HOAs can still prohibit short-term rentals. Why can’t towns and cities in Arizona prohibit short-term rentals? Can the 12 of us form our own HOA to prohibit short-term rentals?

Answer: First, the town of Sedona had the first ordinance in Arizona restricting short-term rentals. In 2016 this ordinance, however, was nullified when the Arizona legislature prohibited towns and cities from regulating short-term rentals. [Note: In 2019 the Arizona legislature has authorized towns and cities to have some control over short-term rentals, e.g., minimize “party homes.”] Interestingly, Arizona is the only state prohibiting towns and cities from regulating short-term rentals. For example, the beach town of Coronado in California restricts short-term rentals to a minimum of 30 days. Second, the 12 neighbors in your community who are opposed to short-term rentals can record CC&Rs and form your own HOA restricting short-term rentals in these 12 homes. Alternatively, the 12 neighbors could agree to record a simple deed restriction prohibiting short-term rentals, which could be enforced by any of the 12 neighbors.

Note: The Arizona legislature can be very sympathetic to special interest groups like VRBO/Airbnb. For example, a few years ago Scottsdale passed an ordinance regulating sign holders on city streets. These sign holders rotated and flipped signs that promoted grand openings, going out of business sales, and other events. Inasmuch as the very purpose of these sign holders is to distract drivers from keeping their eyes on city streets, the Scottsdale ordinance seemed reasonable. The Arizona legislature, however, passed a law prohibiting Scottsdale, and other cities and towns, from regulating sign holders on their city streets.

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